On October 16, 2026, San Francisco Mayor Daniel Lurie signed Ordinance No. 213-26, amending the City’s Healthy Airport Ordinance (HAO), codified in Article 121 of the San Francisco Labor and Employment Code. The HAO, first enacted in 2020, requires minimum health care spending for workers at San Francisco International Airport (SFO). The amendments were adopted following litigation challenging the ordinance’s interaction with ERISA-covered health plans and replaced the scheduled dependent-based expenditure tiers with a single expenditure rate and a new plan-based compliance alternative.
Covered employers with San Francisco Airport Service Employees, including sponsors of self-funded ERISA plans, should review their arrangements before the changes are effective January 1, 2027.
Covered Employers
Under the ordinance, a “covered employer” generally means a business or organization that employs people providing services at San Francisco International Airport through a City contract or through a contract with an airport tenant or subtenant. This can include contractors and subcontractors working on leased airport property. The ordinance calls these businesses “Contracting Parties.”
The rules apply to qualifying employees of those businesses. For airport service employees, the ordinance generally counts an employee expected to work at least 130 hours in a quarter; in the quarter they are hired, the employee is counted if they are expected to average at least 10 hours a week for the rest of that quarter.
A San Francisco Airport Service Employee is covered if they are expected to work at least 130 hours in the current calendar quarter.
How to Comply with the Revised HAO
Beginning January 1, 2027, covered employers generally must make an Irrevocable Health Care Expenditure for each covered San Francisco Airport Service Employee, or comply through the alternative methods addressed below.
The required expenditure is tied to San Francisco’s existing Health Care Accountability Ordinance expenditure rate and is subject to annual adjustment. The required expenditure equals the rate specified in San Francisco Labor and Employment Code § 121.3(a)(2), plus an additional $2.00 per hour. As an illustration, the ordinance provides that if the § 121.3(a)(2) rate were $7.50 per hour, the required expenditure would be $9.50 per hour, capped at $380 per week. The referenced rate is adjusted periodically, and employers should confirm the applicable rate in effect for the relevant compliance period.
Employers may satisfy this obligation by making quarterly payments to the City to fund Medical Reimbursement Accounts for covered employees, with payments due within 30 days after the end of each calendar quarter.
Cost-Efficient Health Insurance Plan Alternative
Alternatively, the expenditure requirement does not apply for any period in which the employer can show it offered at least one “Cost-Efficient Health Insurance Plan.” To qualify, the plan must:
- Be offered to the employee and their dependents.
- Cover all California Essential Health Benefit Benchmark Plan services.
- Provide an actuarial value of at least 84% (i.e., the plan must be relatively rich in benefits, with the plan expected to cover at least 84% of the cost of covered medical services for a typical participant population). Employers considering this alternative should not assume that an existing PPO or high-deductible health plan will qualify and may need actuarial analysis to confirm compliance.
- Require no employee contribution for individual-only coverage.
Employers may offer additional plans. If an employee declines the qualifying plan, the employer must still demonstrate compliance for that employee. Employees may waive coverage by providing proof of other coverage that includes their dependents. Employers must keep waiver records for three years and may credit the forgone premiums against the required expenditure.
Considerations for Plan Sponsors
Although the Ordinance states that it does not require employers to establish or amend a health plan, plan sponsors (even self-funded ERISA plan sponsors) should still evaluate the practical impact of the new requirements. In particular, plan sponsors with San Francisco Airport Service Employees should:
- Determine whether they will comply through Irrevocable Health Care Expenditures or by offering a qualifying Cost-Efficient Health Insurance Plan.
- If relying on a Cost-Efficient Health Insurance Plan, confirm that the plan satisfies the ordinance’s essential health benefit, actuarial value, and employee-contribution requirements.
- Establish procedures to track hours worked by San Francisco Airport Service Employees and retain records of coverage declinations and waivers.
- Review plan documents, SPDs, enrollment materials, and employee contribution structures and implement any amendments necessary to support the selected compliance approach.
The Office of Labor Standards Enforcement has indicated that it will be issuing additional guidance regarding the amended HAO. Employers evaluating compliance options should monitor forthcoming OLSE guidance, FAQs, and related materials before the January 1, 2027, effective date.
If you have questions about the amendments to the HAO or related issues, please contact the author or another Jackson Lewis attorney to discuss.